DealZone

Road to fortune or highway to hell?

GM-OPEL/That will ultimately be the question asked about what kind of a future the German carmaker Opel faces.

Parent General Motors said on Thursday that it indeed wanted
to sell a majority stake in the unit to Canadian auto parts
group Magna and Russia’s Sberbank, a decision long favoured by the German government under Chancellor Angela Merkel.

With about two weeks to go until a general election in
Europe’s biggest economy, this would clearly be a political
victory — but the question remains whether it will also be an
economic one.

Merkel said that GM’s recommendation — which would see
Magna’s Brussels-listed rival bidder RHJ International losing
out in the battle that has dragged on for months — is going to
be tied to conditions.

Although she said that those conditions would be manageable and
negotiable, doubts remain about whether this will be the new
beginning the company is hoping for.

Time for tea – and a new debt panel?

Library photo of forty-one-year-old Englishman Stephen Twining, a tenth generation member of the well-known tea family, drinks a cup of tea at a product launch in Sydney. REUTERS/Tim WimborneThe fall-out from the IMO Car Wash court case continues to rumble through London’s restructuring world, with momentum building for better out-of-court processes to help avoid a repeat performance.

Wednesday saw RBS’s head of restructuring Derek Sach add his voice to calls for a new restructuring panel in London, modelled on the Takeover Panel, which oversees acquisitions in the City of London.

Sach, who spent 19 years at private equity firm 3i before going to RBS to set up the first dedicated restructuring unit in London in 1992, says the new panel is a “wonderful idea”.

Down at the Car Wash

Stock photo of man cleaning a Toyota car at a car wash in Tokyo June 23, 2009. REUTERS/Kim Kyung-Hoon Stock photo of man cleaning a Toyota car at a car wash in Tokyo June 23, 2009. REUTERS/Kim Kyung-Hoon After three days of hearings in a cramped courtroom at London’s Royal Courts of Justice, when the judge “blessed” lenders’ plan to take control of British car cleaning firm IMO Car Wash.

As I wrote earlier, this rare moment in the sunshine for Europe’s largest car-cleaning firm came as low-ranked junior lenders failed in their attempt to block senior creditors’ plans to take over the company as part of a debt restructuring.

On the first day of the hearings I counted no fewer than 72 people in the court as London’s distressed-debt and restructuring community queued to listen to the arguments in this landmark case. One day I ended up sitting on the floor of the courtroom next to one of London’s financial elite listening to lawyers putting forward complex legal arguments about valuation methodologies.

Deals du Jour

An unusual Credit Suisse Group compensation plan could lead to hefty year-end payouts for bankers, The Wall Street Journal said. The newspaper said that the bank told 2,000 top bankers that a $5 billion fund of toxic mortgages and bonds, which it granted as a big portion of 2008 pay, has returned 17 percent since January, citing people familiar with the matter.

The following M&A related stories were reported by media on Friday:

French advertising group Publicis  is poised to buy U.S. digital specialist Razorfish from Microsoft Corp, Les Echos reported in its Friday edition.

Citigroup Inc may give control of its Phibro commodities business to Andrew Hall, the energy trader making headlines for demanding a $100 million payday under his contract, The New York Times said, citing a person with knowledge of the negotiations.

Only the lawyers are cleaning up

A man cleans a row of rickshaws in Karachi July 26, 2009. REUTERS/Akhtar Soomro A month of overcast skies and frequent showers indicates it is business as usual for the British summer, and for one company each day of rain brings particular displeasure.

British car cleaning firm IMO Car Wash is struggling with more than 350 million pounds of debt, and some detractors say demand for its services drops each time it rains. As such, the value of the company is almost as changeable as a British summer.

This is a headache for both its private equity owner and lenders, who have been trying to settle a restructuring of IMO’s finances since the start of the year. Disputes over valuations have sparked a battle between different groups of lenders, with the result set to be decided in a London court on Monday.

Half empty glass

A pint of beer stands on the bar of a public house in Leeds, northern England October 13, 2008. REUTERS/Nigel Roddis (BRITAIN)The recent history of Britain’s eccentrically-named Slug & Lettuce pubs should make a sobering read for ambitious property investors with an eye on similar investments.

The chain’s woes began in 2005, when its then owner, the SFI Group, plunged into administration due to difficulties with its finances.

Its collapse triggered property tycoon Robert Tchenguiz to buy up the group’s best outlets and bring them into his Laurel Pub Company.

Curiouser and curiouser

The rabbit character from Alice in Wonderland poses next to a mural artwork at entrepreneur Marc Ecko's anti-sundance party, with a Mad Hatter Tea Party theme, during the 2008 Sundance Film Festival in Park City, Utah January 20, 2008. The 20-feet mural depicts paparazzi with actual cameras built into the art. REUTERS/Fred Prouser (UNITED STATES)Seen with a post-bubble eye, securitisation is a bit of a looking glass world. Lewis Carroll would probably have appreciated “synthetic” obligations not built on real assets, near-meaningless credit ratings, and legal documents that fail to do what they are designed for.

So spare a thought for holders of asset-backed bonds who have had to take a trip down the rabbit hole.

Some of the worst-affected bonds are commercial-mortgage backed securities (CMBS), which in Europe have suffered largely because of the plunging value of the property used as security for the debt.

Carrying a heavy burden

Library photo of farmers carrying paddy stalks during a harvest at a field in Deli Serdang district of the Indonesia's North Sumatra province June 30, 2009. Indonesia's statistics bureau has projected 2009 unmilled rice output to rise 1.13 percent to 60.93 million tonnes, or the equivalent of around 38 million tonnes of milled rice. REUTERS/Y.T Haryono (INDONESIA AGRICULTURE FOOD) British petrochemicals giant Ineos today announced it has received the overwhelming support of its lenders for proposals to ease the terms on much of its 7.5 billion euro debt load.

The deal leaves the company’s debt burden untouched while lenders will accept a back-dated increase in interest payments as well as a one-off fee.

The company spent months preparing a new business plan and discussing options with lenders and financial advisers. They correctly predicted that lenders would have little appetite for a more severe restructuring, such as asking lenders to write off debts in exchange for an equity stake.

Four Seasons (or more) of restructuring

A woman looks at the 2009 artwork "Sixty Watches" by Austrian artist Michael Schuster at the Art Basel art fair June 9, 2009. The Art Basel runs from June 10 to 14. REUTERS/Arnd Wiegmann (SWITZERLAND ENTERTAINMENT)Restructuring a company’s debts is not a simple process. Unlike acquisition deals, when everyone around the table has something to gain, a restructuring requires everyone to agree to lose something.

Pain has to be shared but everyone has an interest in ensuring someone else takes more of that pain.

As a result, the larger and more complex a company’s debt structure, the more likely it is that restructuring the company’s debt will be a long and difficult process.

Deals du Jour

Despite the sluggish performance of the stock markets recently, there is no shortage of deals to report.

Some corporate finance stories in the newspapers include:

* AIG (AIG.N) has resumed talks to sell its American Life Insurance Co unit to MetLife Inc (MET.N) in a deal that could help the stricken insurer raise more than $15 billion, according to the Financial Times.

* Datang Telecom (600198.SS) is in talks to sell a 20 percent stake to China’s national pension fund worth as much as 3 billion yuan ($428.6 million), China Daily reported.